American Economic Review Vol. 109 No. 4 2019

(Mis)Allocation, Market Power, and Global Oil Extraction

John Asker¹; Allan Collard-Wexler²; Jan De Loecker³

¹ Department of Economics, Columbia University, 420 West 118th Street, New York, NY 10027 (email: ) · ² Duke University and NBER, 230 Social Sciences Building, Durham, NC 27708 (email: ) · ³ KU Leuven, Naamsestraat 69, 3000 Leuven, Belgium (email: )

Abstract

We propose an approach to measuring the misallocation of production in a market that compares actual industry cost curves to undistorted (counterfactual ) supply curves. As compared to traditional, TFPR-based, misallocation measures, this approach leverages cost data, such that results are readily mapped to welfare metrics. As an application, we analyze global crude oil extraction and quantify the extent of misallocation therein, together with the proportion attributable to market power. From 1970 to 2014, we find substantial misallocation, in the order of US$744 billion, 14.1 percent to 21.9 percent of which is attributable to market power.

DOI

10.1257/aer.20171438

Volume

109

Issue

4

Pages

1568-1615

Language

en

Sources

crossref openalex bibtex:phds-export.bib

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓